The Hedonic Wage Technique as a Tool for Estimating the Costs of School Personnel: A Theoretical Exposition with Implications for Empirical Analysis.

Chambers, Jay G.

Present systems for the apportionment of grants from the state or federal level to local public school districts are based primarily on measures of district wealth as modified by weightings for the characteristics of the student population. Until recently little attention has been given to differences among districts in the costs of providing educational services. The application of hedonic wage theory to this field of study is based on the assumption that it is not enough to assess differences in educational costs by considering cross-district variations in salaries paid personnel in similar positions. A measure of the attractiveness of the districts and of the positions, in nonmonetary terms, must be added to or subtracted from the salaries through application of a formula such as the hedonic wage index. In addition, characteristics making employees attractive to employers may result in different pay rates. Discussions of a mathematical model for applying the hedonic theory to school personnel, of effects of imperfections in the market on the model's accuracy, and of how the model can be used to estimate costs of school personnel for purposes of cross-district comparison are presented in this report. (Author/PGD)